Does Westport Fuel Systems (TSE:WPRT) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Westport Fuel Systems Inc. (TSE:WPRT) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Westport Fuel Systems's Debt?

You can click the graphic below for the historical numbers, but it shows that Westport Fuel Systems had US$3.90m of debt in September 2025, down from US$37.6m, one year before. But on the other hand it also has US$33.1m in cash, leading to a US$29.2m net cash position.

How Strong Is Westport Fuel Systems' Balance Sheet?

The latest balance sheet data shows that Westport Fuel Systems had liabilities of US$21.3m due within a year, and liabilities of US$2.57m falling due after that. Offsetting this, it had US$33.1m in cash and US$13.2m in receivables that were due within 12 months. So it can boast US$22.4m more liquid assets than total liabilities.

This surplus strongly suggests that Westport Fuel Systems has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Westport Fuel Systems boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Westport Fuel Systems can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Westport Fuel Systems

In the last year Westport Fuel Systems wasn't profitable at an EBIT level, but managed to grow its revenue by 26%, to US$229m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Westport Fuel Systems?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Westport Fuel Systems had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$9.7m of cash and made a loss of US$27m. But the saving grace is the US$29.2m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Westport Fuel Systems's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with Westport Fuel Systems , and understanding them should be part of your investment process.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.